British Energy chiefs in line for £30m

Bonus scheme entitles executives to 14 times salary * Fees for restructuring ailing nuclear giant hit £104m

British Energy's top executives could make more than £30m from a bonus scheme being set up as part of the rescue of the financially crippled nuclear generator, it emerged yesterday.

British Energy's top executives could make more than £30m from a bonus scheme being set up as part of the rescue of the financially crippled nuclear generator, it emerged yesterday.

Details of the scheme, which entitles the company's seven most senior directors to bonuses equivalent to 14 times their salary over a three-year period, are contained in a restructuring circular posted to shareholders.

The 708-page document also discloses that fees paid to professional advisers in connection with the restructuring of the company will total £104m. The lion's share has gone to lawyers, investment banks and accountants with Clifford Chance, British Energy's legal advisers, collecting £25.7m alone. But even its public relations adviser, Financial Dynamics, has picked up £1.2m.

Shareholders will vote on the restructuring, which will see their stake in the company cut to 2.5 per cent, at an extraordinary meeting on 22 December. The company is then due to re-list its shares on 14 January, provided the courts approve the restructuring. The company is expected to be worth about £1bn when it re-lists compared with a stock market value of £87m when it was delisted last month.

British Energy's bondholders will emerge with the vast majority of the company, although existing shareholders will have the right to subscribe for warrants giving them a further 5 per cent of the company. The Government will be entitled to two-thirds of the company's free cash flow in return for agreeing to shoulder its £4.2bn of nuclear liabilities.

The bonus payments depend on British Energy achieving a number of demanding financial and operational targets, ranging from profit and share price growth to nuclear output and safety performance.

In addition to his salary of £425,000 a year, the company's chief executive Mike Alexander could pick up a bonus of almost £6m. By comparison, the company's 5,100 staff will be eligible for employee shares worth a maximum of £3,000 a year.

The other executives who are eligible for the bonus scheme are the finance director Stephen Billingham, the chief nuclear officer Roy Anderson, the trading director Neil O'Hara, the human relations director Sally Smedley, the company secretary Robert Armour and a yet-to-be-appointed technical director.

The company's chairman, Adrian Montague, is not part of the bonus scheme but will be entitled to a fee of £100,000 when the restructuring becomes effective, on top of a salary this year of £300,000.

In addition to the three-year executive bonus pool which is potentially worth about £28m, there is also an interim bonus scheme which could pay out up to one and a half times salary depending on British Energy's performance in the year to 31 March 2005. This could be worth a further £3m.

Mr Alexander said the company would have to produce spectacular results for maximum bonuses to be paid, increasing profits before interest, tax, depreciation and amortisation seven-fold to £1.6bn and generating 74 terawatt hours of electricity - 7 per cent more than in its record year, 1998/99.

He admitted that the fees associated with the rescue looked high and said he would have much preferred to invest the money in the business. But he maintained that the board had scrutinised all the professional fees it had paid to ensure the amounts were justified.

If shareholders fail to approve the restructuring at next month's meeting, they will receive no stake in the new company at all. In the event that court approval for the deal is delayed, British Energy said it had got a two-month extension to its creditor restructuring agreement with the bondholders which could, if necessary, be further extended to 31 October next year.